Weekly Market Commentary
US GDP beat expectations, with growth coming in at 2.1% for the second quarter of 2019, confirming the strong domestic economy. GDP growth was supported by Consumer and Government spending, although a contraction in Business Investment, may be the trigger for the Fedneeds to cut rates next week. The Fed begins a two day meeting next Tuesday and is expected to be 'dovish' in their monetary policy stance. The majority of analysts expect a rate cut, but do not be surprised if Chairman Powell punts the opportunity, despite huge pressure from President Trump. The Bank of England and the Bank of Japan will also release their latest rate decision, with the B of E resisted the temptation to cut recently, but now has a new Government leader in the shape of Boris Johnson, while the Japanese already have negative rates. The Dollar continues to reflect the strong domestic US economy, with the GBP falling to 1.2380, while the yen moved to 108.60.
The rising reserve is also impacting the under performing commodity currencies, with the AUD falling to 0.6900, while the NZD trade 0.6625. These trade exposed currencies have not fared well recently, buffeted by the lack of progress in the US/China trade war. Key Trump economic adviser, Larry Kudlow, poured cold water on the prospect of an agreement from negotiations in China this coming week. Kudlow warned not to expect a 'Grand Deal' this coming week. President Trump was equally tepid in his enthusiasm for a result, hinting that the Chinese may be playing the long game, waiting for the Presidential election and the chances of getting a better deal from a weaker Democrat.
The coming week sees an avalanche of global economic data releases and Central Bank meetings, speculations and decisions. This will climax in the release of Friday's Non-Farm Payroll's and US employment numbers. The Treasury Secretary Mnuchin and lead trade negotiator Robert Lighthizer, travel to Shanghai this week, to jump start the ongoing trade talks. This should encourage speculation and market volatility, along with Central bank action and economic data releases.
Weekly Market Calendar
29/7 Dallas Fed National Activity Index, NZ Building Permits, Australian Consumer Confidence
30/7 Japan Unemployment, Japan Industrial Production, Bank of Japan Rate Decision, Australia Building Applications, France GDP, German Consumer Confidence, EU Consumer/Business Confidence, German CPI, US Personal Income/Spending, Case Shiller Home Price Index, US Consumer Confidence
31/7 NZ Business Confidence, China Non-Manufacturing/Manufacturing/Composite PMI, Australia CPI, Japan Home Sales, German Retail Sales, German Employment, EU GDP, EU CPI, Italy GDP, US Weekly Mortgage Applications, ADP Jobs Report, Chicago Purchasing Manager, FOMC Rate Decision
1/8 Australia Manufacturing PMI, Japan Manufacturing PMI, Australia Import/Export Prices, Australia Commodity Prices, Italy/France/Germany/EU Manufacturing PMI, UK Manufacturing PMI, Bank of England Rate Decision, Challenger Jobs Report, US Weekly Jobless Claims, US Manufacturing PMI, ISM Manufacturing, ISM Employment
2/8 NZ Consumer Confidence, Bank of Japan Minutes, Australia Retail Sales, EU PPI, Non Farm Payrolls, US Employment, US Trade, US Factory Orders, US Durable Goods Orders, University of Michigan Economic Sentiment
Paul Bettany
Collinson & Co
0406-744-923